Double, double

Double, double, toil and trouble. Fire burn and cauldron bubble! Actually, perhaps we should say triple. triple, prices ripple, as it's triple witching on US equity exchanges today. It's also CPI day, with risky assets not yet out of the Wave C woods. Macro Man expected those factors to dominate markets today, but Asia had other ideas.

The dollar has sold off sharply, equities have rolled over slightly, and gold is looking perky. Yesterday Macro Man sketched out a worldview suggesting an eventual buying opportunity in the dollar. So what's going on?

The market is behaving rationally, within its current belief system. The limp tone of US data carried over yesterday, and subprime continues to attract loads of attention. As such, the market is now pricing in 50 bps of Fed easing, give or take, by year end.

In Europe, meanwhile, the ECB has engaged in a full-on verbal assault, with a seemingly endless wave of hawkish comments hitting the tape. Somewhat oddly, the strip hasn't budged, perhaps as a result of ongoing equity turbulence. So it's the euro that's borne the brunt of the monetary repricing. And if one takes what's currently priced in the strip at face value, it's hard to argue with the EUR/USD move.Now ultimately, Macro Man suspects that the relative strips are mispriced- more likely the Eurodollar strip. However, that doesn't mean that a) it cannot get more mispriced, or b) that the mispricing will correct any time soon.

As such, Macro Man has to concede that there potentially remains more downside for the dollar in the near term. He is not yet prepared to throw risk at the trade...playing the strip looks much more attractive, as that arena is more Voldemort-free.

Finally, Macro Man is clearly losing his mind. He wanted to hedge his gold puts a little more than 60 delta...but forgot that his position is 275 contracts, not 200. Ay caramba! He will therefore bid 650 for another 50 lot of GCJ7.